IPOs with reserved shares and their post-IPO performance
Can the allocation of reserved shares to a firm’s employees be exploited as a possible signaling tool that separates high-quality firms from low-quality firms at their initial public offering (IPO)? In this paper, we will explore the signaling effect of reserved shares by investigating the relat...
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| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project |
| Language: | English |
| Published: |
2010
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/38534 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | Can the allocation of reserved shares to a firm’s employees be exploited as a possible signaling tool that separates high-quality firms from low-quality firms at their initial public offering (IPO)?
In this paper, we will explore the signaling effect of reserved shares by investigating the relationship between reserved shares and a firm’s post-IPO performance.
Specifically, we will analyse a firm’s post-IPO performance based on its stock returns and operating performance. Utilising cumulative market-adjusted abnormal returns (MAAR), this study provides preliminary evidence that firms with a greater proportion of reserved shares generally experience higher stock returns. However, employing return on assets (ROA), return on equity (ROE) and return on sales (ROS) as proxies of a firm’s operating performance, we find no significant relationship between reserved shares and a firm’s operating performance. |
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